Some thoughts about the growth of our board

Some thoughts about the growth of our board

We started our current investing spurt in the beginning of 2017, about five years ago.

When you sign on to the board you’ll see in the middle of the screen a little icon that says “<< 7 days >>” click on it down to where it says “365 days”, and go back 5 years (5 clicks). Back then our board was a twentieth of the size it is now, at most. The first page I came to had a total of 45 recs on an entire page of 20 posts, or an average of a little over two recs per post. A post with 25 recs was unusual, 50 was uncommon, and 100 was really rare. We also had many fewer posts each day.

Our success has flooded us with new posters and readers (that’s you), so you can see we have to limit our posts to meaningful ones to avoid flooding the board and destroying it. I may at times seem arbitrary in deleting posts but that’s why it’s necessary. Thanks for your cooperation

Best,

Saul

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It concerns me that you seem to have no ethical responsibility to the newbies flooding your board. … I wish you would take seriously the responsibility you have assumed as a financial prophet of growing army of acolytes.

Wow. That’s gotta be one of the most off-base, missed-the-mark, clearly-don’t-get-it posts I’ve ever seen at TMF, and it’s from someone with a big red star too.

Saul is not compensated by TMF, and does not make money based on how many readers this board has, how many recs his posts get, or how many people who post here copy his “picks” or methods. Where in the world do you get off assuming he’s unethical in any of what he posts here? It sounds like someone hurt you and you’re looking for someone to blame, because the very essence of this community, stated clearly and repeatedly, is that every investor is personally responsible for their OWN investments. Other people, Saul or anyone else, has NO responsibility. If you can’t accept responsibility, there are plenty of other places to read for investing advice.

And if you honestly think it’s 29 years worth of “luck”, then I don’t think there’s much else anyone can tell you, other than that you’re wrong. It’s his board, and it’s not, as they say, a board about French cooking recipes. If you don’t like it, start your own. That’s *exactly how it goes.

-n8

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I was going to post this reply directly to the author via email-- But I do think this is important to see, and understand.

I believe the most important investment strategy is the one that makes sense to you. Whether the investment style you understand and believe in is index funds, real property, REITS, individual stocks, market timing, commodities, or shiba inu crypto currency-- so long as you are investing the way that makes sense to you, you know who to blame for the results.

If you have the desire to learn something new-- to understand a different investment thesis-- and perhaps even try it out-- You need a place to go to learn. This discussion board is that place-- for a very specific investment style.

This really shouldn’t be hard to understand-- if the board becomes saturated with ideas and ideals that do not pertain to this very specific investment style, it jeopardizes the very fiber of what the Board is trying to accomplish-- to educate those who are interested, and utilize focused group think to discover new opportunities within the investment thesis.

Saul, and the entire board, have provided literally a lifetime’s worth of wisdom regarding this investment style-- they provide this guidance, this knowledgebase in great detail and with vigilant unwavering focus–

This board is not an elementary school classroom, it is for adults and serious investors interested in pursuing education regarding hypergrowth stocks. Sharing the returns accomplished over several decades isn’t necessary, and it isn’t bragging-- Saul doesn’t have to share any of his returns-- but he does it to encourage interested investors-- to show them you can do this too! It’s an opportunity we should all be thankful for-- Saul doesn’t have to share his returns-- and if he didn’t, how many of you would listen when a hard month arrives? How many people would be helped and freed from the rat race-- The answer is “less.”

Less people would be helped.
Less people would be freed.
Less people would benefit from a lifetime’s worth of wisdom.

I think one of the opening paragraphs in Saul’s Rules of the Board says it outright-- Life isn’t fair-- this is just the way it is.

It isn’t always easy-- but it is simple. Come here to learn, glean what you may, be grateful, participate, or don’t-- but don’t distract from the mission of so many dedicated investors to this thesis.

Long UPST, MNDY, BILL, DDOG, NET, and SAUL

MillennialFalcon

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Well, hello there PhoolishPhilip!

Nice to meet you. I haven’t seen you much around these parts, which I found somewhat surprising with your 1,000-post big red star and all. But then I checked and saw this is your first-ever Saul’s post. Thanks for stopping by!

I figured someone who posts that much must share some great info, so I took a peek at your history to see what I might learn. After filtering out the 60% or so of your posts which are basically cranky trolling (which oddly enough includes numerous references to Saul’s even though you don’t post here), it looks like value investing and maybe some mechanical screening is your game. Good for you on finding a style that fits your temperament and goals. I sincerely hope it’s been successful for you. But while you’re here, I hope you don’t mind some feedback on this line you wrote about Saul’s on another board:

The risk of permanent and catastrophic loss from being so highly concentrated in what I would consider to be a momentum strategy is just too great for my taste.

If you really do feel this way – and it would seem so since your history includes multiple versions of this thought – I can understand your dilemma. However, with this being a discussion board and all I was hoping I might present a slightly different interpretation to possibly ease your mind.

The risk of permanent and catastrophic loss from being so highly concentrated…

Well, duh. Of course there’s risk. These are young hypergrowth companies after all. But everyone here understands that. With thousands of members and tens of thousands of posts, I’ve yet to see one detailing a portfolio going to zero using this style. In fairness maybe I just missed it mixed in with the literally thousands of posts from people who seem quite happy with their results. Did you see one somewhere you might be able to link? Thanks in advance.

…in what I would consider to be a momentum strategy…

You might call it a momentum strategy, and many do. However, others might call it strict adherence to a policy of only holding companies meeting an insanely high set of performance and execution standards. I’ll be the first to admit it sometimes seems like the only thing harder than clearing that bar is staying above it for any extended period. Every once in a while, an Alteryx or an Okta or a CrowdStrike spends a considerable amount of time among the best of the best. Unfortunately, other firms come and go in a much shorter time frame. Yet while the companies appear to change quite frequently, the standards remain remarkably stable. I personally consider that a highly disciplined strategy rather than momentum, but that’s just me.

…is just too great for my taste.

Ahh, maybe that’s the crux of the matter. But that’s OK. This style definitely isn’t for everyone. The good thing for you is I can’t think of anyone here who would recommend hypergrowth investing if it doesn’t fit your taste. In fact, it’s strongly discouraged. In some of your non-trolling posts I caught a lot of references to “ROI” and “margin of safety”. While I understand those concepts, I must say continually stepping over those darned-risky dollars to pick up those sure-thing nickels just doesn’t fit my taste at all. But I certainly won’t hold that against you or make a personal attack or suggest hypergrowth might fit you better if you only had a little more, uhhh, intestinal fortitude. That would be totally counterproductive.

Investing’s never been a zero-sum game, and the prevailing spirit here has always been everyone needs to find their own way to play it.

I expect this post to be promptly deleted,

As it probably should. Garbage in, garbage out after all.

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It concerns me that you seem to have no ethical responsibility to the newbies flooding your board. You entice fools with braggadocio about 25 times gains in five years but will not tolerate any criticism of a speculative method that could ruin the uninitiated in no time.

Saul and others here FREELY SHARE their thoughts on high-growth companies. Those thoughts and insights work very well for THAT method of investing. They give away for free thoughts and insights that far surpass investment advisors who charge thousands of dollars per year. Please do not disrespect or insult them.

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I apologize for bringing up LTBH. That wasn’t my main thrust. And trust me, I take full responsibility for my investment decisions and enjoy this board thoroughly. I am learning a lot even if it seems I’m not. I agree with Millenial and N8 and have absolutely no issue with the leadership of this board.

I guess my only desire is that there was more of a post mortem on the 4th quarter UPST ER or, rather, how this board became so cocksure that we were on the verge of another blowout. I’ve gone back to before I ever knew about the board and it seems like the stock has been a special case that led to higher portfolio concentration. More non-traditional analysis. More focus on one stock.

One of the things Saul has said he likes best about the board is crowdsourcing information. All that out-of-the-box analysis was really interesting, but maybe sometimes we were looking for our baseball cards in boxes labeled “Scarves.” There wasn’t a ton of skepticism about whether job openings in Columbus or the new Spanish Platform or the fact Dan Loeb didn’t sell any shares before earnings (he sold 20% after earnings, I believe) or Glassdoor Reviews meant the company’s accelerating growth story was intact. Everything led us to believe Q4 would be like Q3.

For example, some tried to divine what those “bad reviews” meant on Trust Pilot, and contorting them into something positive (more complaints about lag times didn’t mean bad customer service or a fraud strike. it meant they can’t keep up with demand!) Of course, those nuggets are more relevant than my scarves analogy but they’re obviously not as telling as we thought. That’s why I was hoping for more analysis of our analysis. There have been a few posts about this, but not many. In the furtherance of my own education, part of what I’d like to be able to discern is what information matters and what doesn’t.

I didn’t mean to be divisive. I sincerely enjoy what’s going on here and appreciate the environment Saul and the rest are trying to create.

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I suggest ignore PhoolishPhilip. That kind of thoughts is typical of indexers. It’s fruitless to argue with them.

But let me say one thing: Concentrated Hyper growth investing is NOT for everyone.

Back to topic:
I find reading Saul’s oldest posts shreds some new lights. It’s interesting to see how he invested back then and how he invests now. And see the progress. Although he made many mistakes in early years. It appeared his primary strategy was already formed back in 2014.

What I find especially useful is this:

"
In 2010 I was up just 0.3%. In 2011, I was down 14.5%. If you wonder what happened, that was when, with the help of MF Global Gains, I got into all those little Chinese stocks that turned out to be fraudulent. (This was partly the fault of MF GG for recommending them, but certainly in large part my own fault for being naïve. Starrob even warned multiple times about these stocks but I ignored his warnings.)

  1. 32% a year compounded doesn’t mean you make roughly 32% every year. For example, here’s a string of the gains of my entire portfolio for twelve consecutive years starting in 1993. Numbers are percent gain. In other words 21.4 means every $100 turned into $121.40, and 115.5 means every $100 turned into $215.50. Here they are: 21.4%, 15.4%, 43.4%, 29.4%, 17.4%, 4.9%, 115.5%, 19.4%, 46.9%, 19.7%, 124.5%, 16.7%. (So don’t be discouraged if you only make ten percent some year. Keep trying for good gains)."

IMO, one of the most important lesson of Saul is this:
He dosn’t give up just because of a few years of low or negative return!

If he gave up concentrated growth investing after 2009 crash, he would not able to enjoy the 25 times increase from 2017 to 2021.

The reason I got of stocks in early 2021 because I got discouraged. I saw the good stocks crashed and thought they are no longer good stocks. I didn’t do deep study about companies. I lost confidence in Saul’s style. But I am back in August, 2021 with a better, more holistic understanding. Now i study the companies in more details and it gives me confidence to hold in market downturn. I hope I won’t be discouraged again!

Saul’s method is sound but not everyone will understand. For those who understand, not everyone will able to stick with it in all market conditions.

So yeah, concentrated hyper growth investing is a hard thing to do.

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@FallingWallenda: I, too, have been wondering why UPST has marched a different way from what the majority of us was expecting, and why at the same time we were so sure it would grow much more than what the company had guided for and why we were so disappointed about the real results.

My conclusion is that two factors were at play:

  • one is the very short history of UPST coupled with a very disruptive business. We all say we follow the numbers (and we do), but it’s a lot safer to follow the numbers if they come from a SaaS company that has a predictable, steady growth rate (even if that is a high growth rate). In the case of UPST, growth basically appeared to go ballistic, but projecting a ballistic curve from essentially two data points (the last two quarters) is just fraught with a lot more uncertainty. We tried to ring fence that uncertainty by using anecdotal evidence like google search statistics, new banking partners announced and so forth that all seemingly pointed into the right direction, but in terms of real, hard financial numbers, there just wasn’t a lot of data to go by and we should have applied more caution as a consequence.

  • second, and I think this exacerbated the first factor, is simply FOMO. Everyone would love to get in early on the next big growth/success story, and the initial run-up just added to the (apparent) urgency to get in before it’s ‘too late’, i.e. the growth prospects are already fully baked into the price.

At least in my own case, both of these factors clearly played a role in my investment decision - I was very certain that the next earnings release would show tremendous growth, AND I couldn’t wait to see the facts before committing a higher size allocation to UPST that was supported by the historicals.

I continue to hold (at a reduced size allocation) because the story is intact and I don’t see any negative BUSINESS news. The next few months could be painful when watching the share price, but this board, as we should all be aware, is about finding the right companies, not divining the perfect moment to get in or out. It may be that it takes 6 months or a year before the growth we’ve been expecting for Q3 really materializes, but I have no real doubt that it will come. DDOG went through a slow patch, too.

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